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Edited version of your written advice
Authorisation Number: 1013067287182
Date of advice: 5 August 2016
Ruling
Subject: Income tax
Question 1
Is the volunteer entity liable to pay tax on the grants that it received from the government?
Answer
No
This ruling applies for the following periods:
• Year ended 30 June 2009
• Year ended 30 June 2010
• Year ended 30 June 2011
• Year ended 30 June 2012
• Year ended 30 June 2013
• Year ended 30 June 2014
The scheme commences on:
2008
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
The volunteer entity has provided information about its establishment and activities. It has no regular income apart from government grants.
The grants were used to purchase items to undertake the entity's activities.
The members of the entity are all volunteers hence no regular income is required.
Relevant legislative provisions
Income Tax Assessment Act 1997 section 50-1 and
Income Tax Assessment Act 1997 section 50-25.
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Summary
The volunteer entity is not liable to pay income tax on the grants that it received from the government.
Detailed reasoning
The entity will not be liable to pay income tax on the volunteer grants as any income it receives is exempt. Section 50-1 of the Income Tax Assessment Act 1997 (ITAA 1997) exempts from income tax the income of the entities described in the tables listed in Subdivision 50A of the ITAA 1997.
Section 50-25 of the ITAA 1997 is contained in Subdivision 50A of the ITAA 1997. The table in section 50-25 of the ITAA 1997 describes at item 5.2 'a public authority constituted under an *Australian law'.
The term 'public authority constituted under an Australian Law' is not defined in the ITAA 1997. The Commissioner has however issued Taxation Ruling No. IT 2632 Income tax: meaning of 'public authority' in definition of 'exempt public body' in division 16D.
Taxation Ruling IT 2632 discusses the meaning of the term public authority and what is meant by the expression constituted under a law of the Commonwealth, State or Territory.
Paragraphs 15 -19 of Taxation Ruling IT 2632 discuss the meaning of constituted by or under a law and essentially provides that a year by year consideration is necessary to determine whether a body is set up, founded or established as a public authority by or under the relevant law, or has acquired the attributes and qualities of a public authority.
Paragraphs 4-11 of Taxation Ruling IT 2632 consider a number of court decisions which have been made in relation to the term public authority in paragraph 23(d) of the Income Tax Assessment Act 1936 which is equivalent to section 50-25 of the ITAA 1997.
Since the publication of Taxation Ruling IT 2632, there have been Federal Court cases involving the nature of a public authority.
In FC of T v. Bank of Western Australia Limited; FC of T v. State Bank of New South Wales Limited 96 ATC 4009 at 4027, after considering a number of cases in relation to the meaning of public authority Hill J derived the following propositions:
1. A question whether a particular entity is an authority is a question of fact and degree dependent upon all the circumstances of the case…No one factor will be determinative…
2. A private body, corporate or unincorporated, established for profit will not be an authority…
3. Incorporation by legislation is not necessary before a body may be classified as an authority…
4. For a body to be an authority of a State or of the Commonwealth, the body in question must be an agency or instrument of government set up to exercise control or execute a function in the public interest. It must be an instrument of government existing to achieve a government purpose…
5. The body in question must perform a traditional or inalienable function of government and have governmental authority for so doing…
6. It is not necessary for a person or body to be an authority that he, she or it have coercive powers, whether of an administrative or legislative character…Conversely the fact that a person or body has statutory duties or powers will not of itself suffice to characterise that person or body as an authority…
7. At least where the question is whether a body is a "public authority" the body must exercise control power or command for the public advantage or execute a function in the public interest…
In this instance the entity is a public authority constituted under an Australian law.